2019 is set to be a year of massive change as the Government’s suite of housing and tax policies start to bed in. Here’s what property market commentators have to say on the coming year…

Westpac chief economist Dominick Stephens expected the housing market to experience a temporary and modest pickup in late 2018, due to a sudden drop in fixed mortgage rates and the RBNZ loosening its LVR mortgage lending restrictions.

He says that, overall, the latest data (October/November) has been too volatile to draw any definitive conclusion about whether the market has indeed picked up. More data will be required to confirm whether or not the anticipated modest housing market upturn has come to pass.

“In the meantime, it is worth remembering that we unambiguously anticipate that this will be a temporary housing market upturn. Later in 2019 changing tax policies will impact the market, and we firmly anticipate that house prices will fall when mortgage rates (eventually) rise.”

CoreLogic head of research Nick Goodall says there’s LOTS going on in the coming year. That includes the recent LVR changes, which he doesn’t think will have a big impact on activity, and the likelihood of interest rates rises, which he thinks will be small when they happen.

There’s also the bedding in of the foreign buyers ban. Goodall says they will be watching the impact closely, but he cautions the ban doesn’t factor in corporate transactions (where it’s hard to distinguish between domestic and foreign buying), which can be as much as 10% of activity.

“Foreign buyers can still buy into NZ if they are buying off the plans and holding apartments in bigger developments. This is important funding and commitment to buy can help kick off at a time when securing development finance from banks has become harder.

“Sure, the numbers won’t be massive, but ultimately, everything helps when it comes to increasing NZ’s housing stock. They can rent them out, just not to family or associates.”

Also, the Tax Working Group’s final report is due out in February and it’s likely to have a recommendation to impose a capital gains tax, he says. “However, it’s important to note that the government would then have to accept that recommendation and also survive the next election before any tax would come into law, so it’s certainly not a short term impact.”

For investors, 2019’s biggie could be the move to ring-fence rental property losses for tax relief purposes, which is scheduled for April. Goodall says it will mean that any losses can still be applied for tax relief, but limited to the asset class of property.

“So landlords can still use losses to reduce tax across their current property portfolio by applying losses from one property against profit from another property and/or from one year to the next. What is no longer permitted is applying that loss against other forms of income. It’s targeting the speculative end of the market who are in it for the capital gain.”

It will be interesting to see if this triggers some existing landlords to leave the sector, he says. “The bigger investors may restructure in advance, but on its own the ring-fence seems unlikely to cause a mass exodus.”

Overall, Goodall’s crystal ball prediction is another solid year for the market, with sales and values following a similar pattern to this year and without any major upheavals. “The local market is more stabilised, but there’s still the unknown risk of offshore dynamics.”

BNZ chief economist Tony Alexander says that Auckland remains flat and over 2019 the regions are likely to slow. “But supply problems exist in our major cities and these along with low borrowing costs, strong employment growth, above average net immigration, easing credit controls, and rising construction costs, will keep an upward bias to house price increases.”

While the traditional economic cycle may have ceased to exist, it is still reasonable to think of housing cycles albeit not tied to particular terms in years. That means it is holding for the long-term which gives the best gains to housing investments, he says. “It is the short-term opportunists who will be hurt most by the government’s policy changes.”

Alexander has a two-fold pick for things to pay attention to in future. First up, KiwiBuild commentary to and from the Government is slowly shifting toward redirecting construction toward social housing and away from “affordable” housing.

That will necessitate a change in how to pay for such housing given that the properties won’t be on-sold to the private sector, he says. “Opportunities for investors might open up in that regard.

“Also, because the eventual move away from affordable housing will be viewed as detrimental to middle class aspiring young people the capital gains tax proposal to come from the Tax Working Group is not likely to be taken into the next election by this government.”

Stop the War on Tenancies founder Mike Butler says that big changes are proposed for the Residential Tenancies Act and these will reduce the control that landlords will have over their property and make it more difficult for tenants to find a home.

Also, the minimum standards required for insulation, heating, ventilation, draught-proofing, and water-tightness, are proceeding against official advice and have nothing to do with health, he says.

“The evidence shows that ‘healthy homes guarantee’ slogan is nothing more than political spin, which is bad news for all rental property owners who may be forced to spend around $7000 per dwelling on unnecessary upgrades.

“Since an insulation top-up costs the same as insulating from scratch, all those ‘good’ rental property owners who have installed insulation since whenever have probably wasted their money because they may have to re-do it.”